Foreign Currency Non Resident [FCNR] accounts as the name suggests are deposits designated in foreign currency. The same can be opened and maintained by a Non-ResidentIndian who may be an Indian citizen or a Foreign citizen of Indian Origin residing outside India . The accounts are convertible / repatriable and are maintained in foreign currency in the form offixed deposits.

Presently, FCNRs can be maintained in US$, GBP, EURO ,Japanese Yen , Australian $ and Canadian $

Provisions as regards eligibility, types of accounts, permitted debits / credits, rate of interest, Loans against the security of funds held in FCNR account, repatriation of funds by NRI nominee, and miscellaneous matters such as joint holding, operations by POA etc. are quite similar to NRE accounts as provided herein.

2.Definitions

.01 Non Resident Indian [NRI] means an Indian citizen or a foreign citizen of Indian origin (excluding citizens of Bangladesh and Pakistan ) residing outside India .

RBI has clarified that students studying abroad also be treated as NRIs under FEMA and thus are eligible for opening NRE/FCNR a/cs as also foreign investments .

.02 "Person of Indian Origin" means an Indian citizen or a foreign citizen other than citizen of Bangladesh and Pakistan who;

i) at any time held an Indian Passport, or

ii) himself or his parents or grand parents were citizens of India , or

LOANS IN INDIA-To ACCOUNT HOLDER: For business, investment in shares & securities, purchase of house property for own residential purpose and any other personal purpose subject to a maxi. of INR 10 mn.

LOANS IN INDIA-To 3RD PARTY: For personal or business purpose subject to a maxi. of INR 10 mn.
LOANS OVERSEAS: Fund based/ non fund based facility for any bonafide purpose.

10.

TRANSFERS:

Transfer to NRE/FCNR Account of the account-holder or any other NRI permitted.

Gift to Resident/NRI permitted [POA cannot make a Gift on behalf of an NRI ]

11.

ATTORNEY:

An attorney can operate an account but can not open the account, make gift, transfer funds to another NRE/FCNR Account nor remit abroad .However an attorney can withdraw for local payments or remittance to the account holder himself through normal banking channels provided specific powers are granted.

12.

NOMINATION :

Permissible.

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RENEWAL / TRANSFER

.01Can be renewed or transferred to NRI's other NRE / FCNR account or another NRI's NRE / FCNR account.

.02 Transfer to another NRI's NRE / FCNR account permitted.

.03 Transfer abroad by way of remittance - Allowed.

The account can also be shifted from one bank to another bank in India .

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PREMATURE WITHDRAWAL:

Permissible: - However for period of less than 12 months - No Interest payable,
Above 12 Months - subject to penalty.

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TAXABILITY :

01 Interest exempt from Income Tax.

.02Balance not subject to Wealth Tax.

.03No Gift Tax provisions in India . However w.e.f. 1-4-2006 amount received in excess of Rs.50,000 by way of gifts from persons other than specified relatives is included in donee’s income and chargeable to income tax.

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RETURNING NRIs

Can be continued and maintained as FCNR uptil maturity and thereafter transferable to :
- Residential Foreign Currency ( RFC) Account or
balance converted into INR and retained in a resident rupee account.

(e) Interest on Government securities and dividend on units of mutual funds, or any other income provided the securities/units were purchased from NRE/FCNR account or out of inward remittance through normal banking channels on repatriation basis..

(f) Maturity proceeds of Government securities and units of mutual funds sold on a recognized stock exchange in India and sale proceeds of units received from mutual funds,

provided the securities/units were originally purchased from NRE/FCNR account or forex remittances received from outside India on repatriation basis..

(g) Refund of share/debenture subscriptions to new issues of Indian companies provided subscription was paid from NRE /FCNR account or forex remittance .

(h) Refund of advance of property, together with interest, if any (net of income tax provided the original payment was made out of NRE / FCNR account or forex remittance from abroad

(i) Any other credit if covered under general or special permission granted by Reserve Bank.

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PERMITTED DEBITS

(a) Local disbursements .

(b) Remittances outside India .

(c) Transfer to NRE/FCNR accounts of the account holder or another NRI.

(d) Investment in shares/securities /commercial paper of an Indian company or for purchase of immovable property in India permitted under FEMA.

(e) Any other transaction if covered under general or special permission granted by the Reserve Bank.